Google has agreed to purchase online video phenomenon YouTube for US$1.65 billion in stock, the companies announced Monday in the US.
The deal, which had been rumoured for days, will dramatically improve Google's video-sharing service with one of the Internet's hottest properties in YouTube, which allows Net users to upload video clips and share them with the world, for better or worse.
YouTube will operate independently, and the companies will work together on building new features for independent users as well as for aspiring directors, they said in a press release. The deal is expected to close in the fourth quarter of 2006.
"This is one of many investments that Google will be making to put video at the heart of a user's online experience," said Google CEO Eric Schmidt on a conference call after the deal was announced.
YouTube co-founder and chief technology officer Steve Chen said: "We now have the resources to take our service to the next level."
The companies struck an all-stock deal in order to make the transaction tax-free for the YouTube shareholders, according to David Drummond, senior vice president of corporate development for Google.
YouTube's suitors over the last six months have, according to reports, included Microsoft, Yahoo, News Corporation and other online and traditional media giants looking to get in on the viral video craze.
However, the process of trying to determine YouTube's value over the last six months reminded more than a few analysts of the dot-com bubble frenzy in the late 1990s, when companies were being purchased based on a user base and a dream, regardless of whether they were actually able to turn a profit.
Microsoft was looking into buying something like YouTube earlier this year but eventually decided to build its own video sharing service, known as Soapbox, according to Whitney Burke, a spokeswoman for the company.
"We are excited about the potential we are seeing in the beta of Soapbox on MSN and believe building our own solution is a more cost-effective way to compete in this new space," said Burke in a statement.
CNET News.com's Anne Broache contributed to this article.
